Amtrak - a failing enterprise and a black hole of waste, fraud, and abuse

Since 1971, the federal government has been subsidizing the for-profit passenger rail system Amtrak. The company received $1.4 billion in 2012, and the House of Representatives increased its appropriation to $1.8 billion for fiscal year (FY) 2013. With a trillion dollar deficit and the national debt at a record $16.2 trillion, federal funding for Amtrak has been targeted by many for elimination. Based on the company’s track record, it is hard to justify continued taxpayer support.

Amtrak’s problems are glaring. An October 16, 2012 Washington Examiner article revealed that Amtrak lost $84.5 million in food and beverage sales in 2011, despite a mandate from Congress that the company break even in this enterprise. In June 2011, the Amtrak Office of the Inspector General (OIG) issued a report which showed that the rail line lost $61 million in food sales in 2010. Over the past decade, Amtrak lost $833.8 million on food sales alone. In August 2012, House Transportation and Infrastructure Committee Chairman John Mica (R-Fla.) disclosed that Amtrak spent $16.15 per hamburger, but charged $9.50 to customers, for a loss of $6.65 for every hamburger sold. Of course, taxpayers made up the difference. Amtrak management clearly has no idea about how to effectively control costs and seems indifferent to the impact of their negligence on taxpayers.

Unfortunately, the waste and abuse does not end with food sales. The Amtrak OIG has issued several reports detailing inadequate supervision, which has led to fraud and waste. For example, in a September 2012 report, the OIG investigated two separate employees who received fraudulent pay for hours they never worked. One employee was paid $5,600 in regular and overtime pay “when he was actually off Amtrak property officiating at high school sporting events.” Another employee was observed for 84 days, and it was discovered that “$16,500 of the $27,000, or 61 percent of the overtime wages he was paid were fraudulent.” The OIG concluded that since it is likely that this employee had a history of fraudulent overtime pay, the amount of fraudulent pay “would be approximately $143,300 of the $234,928 that he was paid.” Concerns over the lack of oversight have prompted the OIG to conduct a more wide-ranging report “reviewing company‐wide management controls over employees’ use of overtime.” That report will further tarnish Amtrak’s reputation.

Another OIG report released in September disclosed that three contracts funded by the American Recovery and Reinvestment Act (stimulus) for Amtrak station improvement totaling $35.7 million included $1.2 million in costs that “were not adequately supported or allowable.” The report also found that Amtrak had “put into place a duplicative and costly process to review contractor invoices that added minimal benefit potentially wasting an estimated $2.2 million.”

Amtrak boasts that ridership continues to increase by 3.5 percent a year, with the majority of this increase coming through Amtrak’s Northeast corridor routes. According to an October 2009 Pew report, 41 of the 44 lines Amtrak operated in 2008 lost money, leading to a $32 loss per passenger. Moreover, in Amtrak’s FY 2013 budget, the rail line revealed that only five of the 46 lines it operates would turn a profit, all of them located in the Northeast corridor. None of the long distance, lesser-used routes were projected to turn a profit. In fact, Amtrak stated that these lines cost the most to operate and bring in the least amount of revenue. Given this information, any well-managed privately owned business would have shut down these lines years ago.

Eliminating subsidies for Amtrak would allow the private sector to flourish by providing service in the economically viable lines Amtrak currently operates and remove the burden on taxpayers who are currently paying for routes that lose money. The next Congress should derail taxpayer funding for Amtrak, a failing enterprise and a black hole of waste, fraud, and abuse.